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Investment Scam Victims Miffed by Bureaucratic Foot-Dragging

A town in northeastern China has shirked its responsibility to compensate victims of an investment scam, underscoring the plight of those who are eligible for government restitution schemes but remain emptyhanded.

According to Sixth Tone’s sister publication, The Paper, the victims of a fraud case in Yanminghu, Jilin province, were supposed to receive nearly 5.2 million yuan ($786,000) in compensation payments from the local government by the end of November. But when the end of the month came and went, they were left out of pocket and clamoring for legal recourse.

“The government has not shown enough sincerity in tackling the problem,” Liu Yuhong, one of the plaintiffs in the case, told Sixth Tone on Monday. “They keep procrastinating.”

According to court documents, the scam started with a company called Dunhua Limin Real Estate, which beginning in 2009 borrowed money from residents in Yanminghu, promising high interest returns. As security, the company gave investors mortgage certificates for properties it owned, that turned out to be counterfeit: Local official Zhang Shengguo had issued multiple certificates for each property. A court later ruled that because Zhang, then the director of the town’s planning administration office, was complicit in the scam, the town government was therefore partially responsible for the victims’ losses.

China passed the State Compensation Law in 1994 to provide restitution to citizens whose interests have been infringed upon by state organs or public officials. However, bureaucratic delays in processing such payments have left many victims in precarious situations, and experts are calling for change.

“Our national compensation law only specifies when payments should be applied, but it does not stipulate punitive measures in cases of resistance or delay,” Zhang Tieyan, an attorney at Century Law Firm in Beijing, told Sixth Tone on Tuesday. “Many applicants for state compensation are left helpless in the face of such situations.”

In June, an intermediate court ordered the Yanminghu government to pay varying amounts of compensation to five plaintiffs following a lawsuit. Then in September, the plaintiffs and the local authorities agreed that the compensation payments would be distributed by Nov. 30 — which did not happen.

Liu and her husband invested some 1.8 million yuan with Dunhua Limin, hoping for profitable returns that never came. Now, almost five months since the court ordered the government to take joint liability with the real estate company, they’re still waiting for the money they’re owed, and are planning to petition the Supreme People’s Court in Beijing.

Authorities in Yanminghu and Dunhua, the city that administers it, declined to comment on developments in the case when contacted by Sixth Tone on Tuesday.

Last year, two owners of Dunhua Limin Real Estate were handed prison sentences of three and 15 years for fraud and other financial crimes. The government official, Zhang Shengguo, was also sentenced to three and a half years in prison for abusing his authority.

Earlier this year, the Yanminghu government dithered in paying 6 million yuan in a separate compensation package to loan scam victims targeted by the same company. The town’s mayor at the time blamed the city government for not issuing the funds, but the seven plaintiffs finally received the payments owed to them in September, nine months after the proposed date.

Editor: Bibek Bhandari.

(Header image: The message ‘Serve the people’ is displayed in Chinese characters on the glass door of a township government office in Changzhou, Jiangsu province, Nov. 16, 2014. An Xin/VCG)